Forecasting the European EPC sector is a difficult task, bearing in mind that there are more than 20 diverse countries that all have different traditions and construction related drivers. The construction market forecast for each of these countries fluctuates on politics of each Government’s economic policies or on collective EU mandates.
Construction activity is starting to pick up in a few countries in Western Europe, these countries include, Portugal, Belgium, Ireland and Netherlands. Much of the future construction growth will be enhanced by the improving economies and increased Government spending on public facilities and infrastructure projects. European economies (for the most part) appear to be improving as we transition into the 4th Q of 2018. At least half a dozen countries are starting to see positive signs of growth for the first time in more than eight years. The Euro Zone is projected to see 1.9% to 2.2% GDP growth in the 2019, the European construction sector is expected to see slow to moderate growth for the next two years.
In the UK, Brexit negotiations are still in a state of flux, more than two years after the UK referendum, this economic uncertainty is expected to have a negative impact on construction activity in 2019. The economic impact and uncertainty of “Brexit” is still being experienced in the UK, the Pound Sterling has dropped more than 10% against the US Dollar in the last two years. The British economy and its construction sector has weathered the “Brexit” storm and is improving slightly from its short post-Brexit dive. The British housing market in and around London is starting to trend upwards again as we move into the 4th Q of 2018.
However, the jury is still out on “Brexit” – some experts believe it will positively impact the UK construction industry, while there is another group that forecasts doom and gloom for the UK economy. The High Speed Rail Link (HS2) between London and Birmingham (150 km costing $5 billion) is officially a “go”, this four year project is projected to employ as many as 10,000 construction related jobs, a major new nuclear power plant and the 3rd Heathrow runway are a number of major projects that have been announced in the last six months. Construction costs in the Britain are moving upwards again in the 2.5% to 3.1% range. British Trade Unions are looking for increases in hourly wage rates of between 4% and 6%, if this happens look for inflation and construction costs to start increasing in the 1st half of 2019 and beyond. Overall, the UK construction sector is projected to contract in 2019 by 2.5% to 5% due to the uncertainty of the “Brexit” situation. The UK GDP is forecast to grow to 1.7% range in the 4th Q of 2018, the unemployment rate is improving, the current rate is 4.1%, and construction unemployment is higher in the 5.1% to 6.3%. Inflation is projected to be in the 2.2% to 2.5% range by the end of 2018.
Germany is still the #1 country in the EU, if Germany is doing well then the rest of Europe should be performing well – however, going into 2019 Germany is not performing to its’ full potential. The German GDP growth is forecast to be 2.5% by the end of 2018, unemployment is currently 3.4%. Inflation remains low at 1.9%. Germany is the largest economy in the Euro Zone, slow and steady growth appears to be on the cards for the 2019, and German construction activity in 2019 is expected to moderately improve over 2018 levels. The Nord Stream 2 Pipeline Project a controversial gas pipeline project from Russia to Germany has recently broken ground.
The French economy is forecast to grow by 1.7% for the 4th Q of 2018. Higher energy costs could hinder future construction in 2019, however it appears that France is on a slow economic recovery. The construction sector continues to experience minimal growth; there are a number of major infrastructure / transportation projects in the pipeline. Unemployment in France is forecast to be in the 8.9% to 9.2% range in the 4th Q of 2018, with construction escalation in the 1.9% to 2.4% range.
Northern Europe, Norway, Sweden, Denmark and Finland are forecast to experience moderate related construction activity in 2019, with these countries GDP’s ranging between 1.8% & and 2.3% – good, but not that great.
Eastern Europe, Poland, Czech Republic, Latvia, Estonia, Hungary and Romania are forecast to experience reasonable construction related growth in 2019, with GDP’s ranging between 2.2% & and 2.9%.
Southern Europe, Spain, Portugal, Italy and Greece are seeing an improvement to their economies and their construction sectors, the 2019 GDP’s forecast for these countries ranges between 2.5% & and 3.1%. Turkey is in the middle of an economic emergency, the Turkish lira has fallen nearly 40 % against the US dollar in the last six months. Double-digit inflation has sent prices of food, energy and construction related materials soaring. This situation could get worse before it gets better. Spanish EPC firms have been successful in wining major infrastructure and petro-chemical in the Middle East.
The other European economies such as Austria, Lithuania, Bosnia, Bulgaria and Switzerland continue to be somewhat slow-moving, with restrained or limited growth and above average unemployment rates.
The majority of countries in Western and Eastern European will continue to experience a contraction of their construction sectors in 2019, Brexit, the ongoing Ukraine standoff with Russia will be the reasons for this situation.